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Domaine Serene Vineyards and Winery, Inc. v. Rynders: US District Court : CIVIL PROCEDURE - plaintiff's citizenship not bottled up in Minnesota: also a la maison in Oregon;

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
08-CV-5060(JMR/AJB)
Domaine Serene Vineyards and )
Winery, Inc. )
)
v. ) ORDER
)
Anthony Rynders )
Things have gotten crossways, if not Sideways, between
plaintiff, a pinot noir grower, and its former winemaker,
defendant, Anthony Rynders. All is not serene at the Domaine
vineyard. The winery filed suit in Minnesota state court accusing
defendant of dealing in his own, rather than his employers,
interest.
The Court expresses no opinion concerning the merits of the
substantive dispute. It must, however, consider the propriety of
defendants August, 2008, removal of this matter to federal court.
Once removed, the vintner asked the Court to dismiss the case for
improper venue, or transfer venue to the District of Oregon. The
winery has countered by moving for remand.
Upon review, the Court finds it is without subject matter
jurisdiction, and remands the matter to state court [Docket No.
12]. In the absence of jurisdiction, the Court may not rule on
defendants motion [Docket No. 4].
2
I. Background
A. The Parties
Plaintiff, Domaine Serene Vineyards and Winery, Inc. (Domaine
Serene), produces and sells premium pinot noir, chardonnay, and
syrah wines. It is incorporated in Minnesota. Its business
operations, encompassing most accounting functions, including
payroll, accounts receivable, and invoicing, as well as human
resources, are based in Maple Grove, Minnesota. One marketing
employee works from North Carolina. The company, however,
manufactures Oregon wines, which are produced, bottled, stored, and
shipped from Oregon. Its wine tastings are conducted at the
companys Dayton, Oregon, location. The majority of Domaine
Serenes employees work at the Oregon vineyard. The companys
stationery lists Oregon as its contact location.
Defendant, Anthony Rynders, resides in Forest Grove, Oregon.
He worked as Domaine Serenes winemaker from 1998 through May,
2008, without an employment contract. The employee/employer
relationship ripened, coming to fruition in March, 2001, when
Domaine Serene offered Rynders additional financial inducement in
the form of an Employee Incentive Agreement. Under this Agreement,
Rynders was to receive a percentage of profits generated by Domaine
Serenes Rockblock Syrah wine. The Agreement was not an employment
contract, and Rynders remained an at-will employee. The
Agreement particularly specified that legal disputes related to it
3
be brought in an appropriate Minnesota court. Intoxicated by
future prospects, each party consented to the exclusive
jurisdiction of the courts of the State of Minnesota for this
purpose.
In 2004, Rynders began to explore separate opportunities in
the wine industry. To this end, he invested in a vineyard and
purchased a small farm. In May, 2008, he proposed to Domaine
Serene that his position be changed to that of consultant. One
week later, Domaine Serene fired Rynders and had him escorted from
the property.
B. Procedural History
Three months after Rynders termination, the winery filed suit
in Minnesota state court seeking a declaratory judgment that the
Employee Incentive Agreement had been terminated. It further
accused Rynders of violating the Uniform Trade Secrets Act,
breaching his duty of confidentiality and loyalty, as well as his
fiduciary duty, and theft of computer files and documents.
Rynders removed the case to federal court. Domaine Serene
claims there is a lack of diversity; Rynders claims the company
has bootstrapped its trade secrets claims by use of the Employee
Incentive Agreements forum-selection clause.
II. Diversity Jurisdiction
A federal case always begins with the question of
jurisdiction. Mouawad v. Gonzales, 485 F.3d 405, 411 (8th Cir.
4
2007) (At the threshold, we must determine whether Congress has
granted our court jurisdiction to decide this issue.). This case
comes before the Court on defendants claim of diversity, within
the contemplation of 28 U.S.C. 1441(a). Congress has conferred
upon the District Courts original jurisdiction over civil actions
where the amount in controversy exceeds ,000, and the dispute
concerns citizens of different states. 28 U.S.C. 1332(a).
Diversity jurisdiction requires that each defendant is a citizen
of a different State from each plaintiff. Owen Equip. & Erection
v. Kroger, 437 U.S. 365, 373 (1978) (emphasis in original). Courts
determine citizenship as of the date the complaint was filed.
Janzen v. Goos, 302 F.2d 421, 424 (8th Cir. 1962).
The parties appear to agree there is more than ,000 at
issue. The dispute, then, turns on whether the parties are
diverse.
Anthony Rynders is a resident of Oregon. He claims the
parties are diverse because Domaine Serene is a citizen of
Minnesota. Domaine Serene responds by claiming citizenship in both
Oregon and Minnesota. If Domaine Serene is correct, the Oregon
portion of its citizenship places it, and the winemaker, in Oregon,
meaning there is incomplete diversity. If the winery and Rynders
are each citizens of Oregon, the door to the federal courthouse is
locked - compelling remand.
5
A. Principal Place of Business
A corporation, unlike an individual, may be a citizen of more
than one state. 28 U.S.C. 1332(c)(1). [A] corporation shall
be deemed to be a citizen of any State by which it has been
incorporated and of the State where it has its principal place of
business. Id. Corporations may only have one principal place of
business for diversity of citizenship purposes. Capitol Indem.
Corp. v. Russellville Steel Co., 367 F.3d 831, 835 (8th Cir. 2004).
Clearly, plaintiffs Minnesota incorporation makes it a citizen of
this state. But if its principal place of business is Oregon, it
is also a citizen of that state.
The diversity statute does not define a corporations
principal place of business, compelling the courts to do so. These
efforts have borne fruit of three varieties. First is the nerve
center test, which makes the home office, or place where the
corporations officers direct, control, and coordinate its
activities, determinative. Peterson v. Cooley, 142 F.3d 181, 184
(4th Cir. 1998). The second, corporate activities test,
considers the employees location, the corporations tangible
property, and the location of production facilities. Kelly v. U.S.
Steel Corp., 284 F.2d 850, 854 (3d Cir. 1960). The third test is
the total activity test.
As of 2004, the Eighth Circuit Court of Appeals ha[d] not
adopted a test for determining a corporations principal place of
6
business. Capitol Indem., 367 F.3d at 835. But at the same
time, the Court of Appeals termed the total activity test the most
appropriate and least limiting of the tests other circuits have
applied. Id. at 836. The total activity test is an amalgam of
the nerve center and corporate activities test. It recognizes
that the nature of a corporations activities will impact the
relative importance of production activities, service activities,
and corporate decision making. Id. Unlike the nerve center test,
bound to the situs of the corporate headquarters, or the corporate
activities test, constrained to consider only the locus of
production facilities, the total activity test considers both. The
Eighth Circuit noted the total activity test allowed for
flexibility, and focused on the most appropriate considerations.
Id.
This District has favorably considered the total activity
test. See, e.g., N. Star Hotels Corp. v. Mid-City Hotel Assocs.,
696 F. Supp. 1265, 1270 (D. Minn. 1988). In North Star Hotels, the
Honorable Harry MacLaughlin cited the total activity tests ability
to provide a realistic, flexible and nonformalistic approach to
determining a corporations principal place of business through a
balancing of all relevant factors. Id. The total activity test
permits a court to consider a companys purpose when assigning a
principal place of business. [W]hen virtually all of the
corporate business is conducted in one state, but the headquarters
7
and corporate policy-making functions are located in another, the
situs of the corporate business assumes greater importance. Id.
Applying this test, Judge MacLaughlin found North Stars principal
place of business was Minnesota, while Houston, Texas, was its
nerve center for management activities. Id. at 1271.
Similarly, in Hanna Mining Co. v. Minn. Power & Light Co., the
Honorable Miles Lord found a corporation whose sole business
concerned a Minnesota mining project had its principal place of
business in Minnesota, not in the state in which its executive and
administrative offices may be located. 573 F. Supp. 1395, 1400
(D. Minn. 1983), affd 739 F.2d 1368 (8th Cir. 1984). Where a
companys raison detre is tied to a particular state, that state
serves as the companys principal place of business under the total
activity test.
Despite the Eighth Circuits expressed preference - if not
adoption - of the total activity test, Rynders asks the Court to
adopt the nerve center test, arguing plaintiffs operations in
Oregon, Minnesota, and North Carolina, and its multi-state wine
sales make the nerve center test the better approach. The Court
rejects this suggestion. Certainly, a companys nerve center
assumes greater importance when no one state is clearly the center
of corporate activity. N. Star Hotels, 696 F. Supp. at 1270. But
Rynders errs in two ways: first, he neglects the Eighth Circuits
expressed preference; second, he exaggerates the extent of Domaine
8
Serenes Minnesota operations. The business is incorporated in
Minnesota, but the grapes are grown, vinified, bottled, and shipped
from Oregon. Oregon is clearly the center of Domaine Serenes
corporate activity. The nerve center test is inappropriate in
these circumstances.
B. Applying the Total Activity Test
Under the total activity test, plaintiffs principal place of
business is Oregon. Other than its corporate organization,
virtually all of its business is conducted in, and emerges from,
one state. Almost all of its employees are based in Oregon. This
is a winemaking enterprise in the finest sense; the total activity
of Domaine Serenes business is making wine, and this entire
activity occurs in Oregon. While Domaine Serene is a citizen of
Minnesota with corporate offices here, this fact does not make
Minnesota the companys principal place of business. The company
runs human resources, accounting, and payroll from Minnesota. But
its business is based in Oregon. The Court finds the situs of the
corporate business assumes greater importance than the Minnesotabased
corporate policy-making functions. N. Star Hotels, 696 F.
Supp. at 1270.
This result is fully consonant with Congresss intent in
providing for diversity jurisdiction. Diversity jurisdiction was
created to protect individuals and corporations from prejudice
against noncitizens. Logically then, Domaine Serenes principal
place of business should be the place where it has its greatest
9
contacts with the public. Id. at 1272 ([I]t is by visible
presence, including the employment of local people, that a
corporation will become popularly recognized as domestic.)
(citation omitted). Because Domaine Serene has its most visible
presence in Oregon, the very concept of diversity jurisdiction is
served by this holding.
Domain Serenes dual citizenship means defendant Rynders and
the company are both citizens of Oregon. There is a lack of
diversity between the parties. Lacking subject matter
jurisdiction, this Courts only function is to remand this case to
state court. 28 U.S.C. 1447(c) (If at any time before final
judgment it appears that the district court lacks subject matter
jurisdiction, the case shall be remanded.).
III. Conclusion
Because this Court lacks diversity jurisdiction, it will not
consider defendants motion to dismiss for improper venue or
transfer. See Integrated Health Servs. v. THCI Co., 417 F.3d 953,
957 (8th Cir. 2005) (noting that a court without subject matter
jurisdiction cannot transfer a case to another court under 28
U.S.C. 1404(a)).
Accordingly, IT IS ORDERED that:
1. Defendants motion to dismiss for improper venue or
transfer [Docket No. 4] is denied.
2. Plaintiffs motion to remand [Docket No. 12] is granted.
10
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: January 9, 2009
S/JAMES M. ROSENBAUM
JAMES M. ROSENBAUM
United States District Judge
 

 
 
 

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